Before heading into this Emergency Summer Budget it was well-known that there would have to be major cuts for the Chancellor to balance the books according to the schedule he set out. With it being the first Conservative-only Budget since 1996 we were aware the cuts to welfare would be wide and major, but also that the focus on encouraging work and business would be prevalent. On both counts the Chancellor did not surprise. Below are a summary of the key points revealed today.
We will update out calculators for any changes as soon as we can - check back regularly to see how you are affected. As of now most calculators have been updated with published rates and allowances for 2016/2017.
So, the main tax and welfare points in summary:
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Tax-Free Allowance Increased Further
From next April, 2016, the new personal tax-free allowance will be £11,000. A rise of £400 from today.
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Higher Rate Threshold Raised Further
From April 2016, people will have to earn a gross income of above £43,000 to fall into the 40 percent tax band.
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Corporation Taxes To Cut To 18 percent by 2020
Rates to fall to 19% in 2017 first, then 18% in 2020.
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Annual Investment Allowance Drop Revised
Rather than fall to £25,000, the allowance will not be set at £200,000 permanently.
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National Insurance Employment Allowance Revised
The amount a business can claim againt their Employers' National Insurance Bill has been increased to £3,000 from April 2016.
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Massive Changes To How Dividends Are Taxed
The Dividend Tax Credit has been scrapped. Instead, like Capital Gains, Dividends will have their own allowance and rate structure. A £5,000 dividend allowance for all taxpayers from April 2016, followed by a basic rate of 7.5%, 32.5% for higher rate taxpayers and 38.1% for top rate taxpayers.
We have updated our 'Dividend Tax Calculator 'and 'Dividend v Salary' calculators to reflect the changes - just select the 2016/2017 tax year.
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National Living Wage to reach over £9 per hour by 2020
From next April, the NLW will be £7.20 per hour for people over 25 years old.
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Annual Pension Contributions Limit For Top Rate Taxpayers
From next April, people earning over £150,000 will have the amount of relief claimable tapered to as low as £10,000.
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Welfare Cuts To Working-Age Benefits
Tax credits threshold reduced to £3,850 with the taper percentage increased to 48 percent. Family element removed for new claimants, and child element limited to maximum of two children. Benefit cap reduced to £20k, and £23k in London.
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Housing Benefit Changes
Automatic entitlement for 18-21 year olds removed.
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Free Childcare For Working Parents
Parents of 3 - 4 year olds to receive 30 hours of free childcare entitlement.
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Non-domiciles changes
Permanent status abolished for non-doms with UK presence for 15 of last 20 years.
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Tax Relief For Landlords Capped
Landlords offsetting tax on profits by using Interest paid on mortgages limited to basic rate relief only. This will be phased in by 2020. Wear and Tear Allowance to also be limited to replacement of furnishings from April 2016.
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VED to be replaced by new system for post-2017 cars.
Standard rates will be £140 per year, but the first year tax will be based upon the CO2 emissions - ranging from zero to £2,000.